Canadian stocks flat as wildfire in oil sands causes supply concern

By on May 7, 2016

(Wikipedia photo)
(Wikipedia photo)

TORONTO – Canada’s main stock market in Toronto remained little changed Thursday though a raging wildfire in Alberta cut production from Canada’s oil sands region and raised concerns about immediate oil supplies rather than a longer- term glut.

The Toronto Stock Exchange’s benchmark Standard & Poor’s/TSX Composite Index added 0.01 point, or 0.00 percent, to close at 13, 632.01 points. Six of the TSX index’s eight main sub-sectors were lower.

Oil prices rallied Thursday amid supply worries due to massive wildfires in Canada. While the oil sands facilities are not in the fire’s path, it has dealt a blow to crude operations, with companies curtailing production or stopping it altogether.

Shell, Suncor, Husky and Connacher have collectively cut more than 500,000 barrels per day of production and Inter Pipeline – a critical supplier of a much needed additive known as diluent for most oil sands production – has been forced to curtail supplies to the region.

Analysts say up to 1 million barrels of daily production, or roughly 40 percent of total oil sands output, is potentially at risk of disruption.

Canada’s oil sands are considered the third-largest reserves of crude oil in the world, with 166 billion barrels of recoverable oil covering 142,000 square kilometers.

About 80 percent of Canada’s oil sands are buried too deep for mining and must be recovered through wells. Bitumen ore mined at the surface is considered to be much less flammable than other types of petroleum because it is full of impurities such as sand.

Among major TSX energy plays, Suncor Energy Inc. retreated 2.98 percent to 33.16 Canadian dollars (USD25.77), while Canadian Natural Resources Limited dropped 0.25 percent to 35.85 Canadian dollars.

National Bank of Canada dropped 33 cents, or 0.8 percent, sliding to a month low of 42.20 Canadian dollars, after the lender said it will set aside 195 million Canadian dollars to cover soured oil-and-gas loans in the second quarter, joining Canadian Western Bank in providing early warning of rising credit losses tied to energy after the rout in crude prices.

Manulife, the nation’s largest life insurer, added 19 cents, or 1.1 percent, to 18.26 Canadian dollars, as first-quarter profit surged 45 percent after benefiting from interest rate movements and record insurance sales in Asia.

Yamana Gold Inc. picked up 39 cents, or 7.3 percent, to 5.77 Canadian dollars, and Barrick Gold Corp. added 52 cents, or 2.3 percent, to 23.00 Canadian dollars, as raw-materials producers climbed.

On the economic slate, Statistics Canada reported that the total value of building permits issued by Canadian municipalities was down 7.0 percent to 6.9 billion Canadian dollars in March, marking the second decline in three months.

The agency said the dip, which followed a 15.3 percent gain in February, was largely the result of lower construction intentions for commercial buildings in Alberta, Ontario and British Columbia.

Meanwhile, insurance companies are setting up temporary claims hubs and sending additional staff to Alberta as wildfires in Fort McMurray destroyed property in what could become one of the costliest natural disasters in Canadian history.

The damage could reach 9 billion Canadian dollars for insurers if it gets to the point that the town has to be rebuilt, an analyst at Bank of Montreal said Thursday.

The Canadian dollar traded slightly higher at USD0.7771, compared with Wednesday’s closing rate of USD0.7770.